Pandora sues ASCAP to get lower rates for media streaming

Streaming service Pandora has filed a lawsuit against ASCAP, an agency that collects royalties for the broadcast or live performances of its members' musical copyrights, in order to secure lower royalty rates to stream music to subscribers.

Pandora says that the licensing agreement that it reached with ASCAP was "ill-suited and not reasonable" and warrants a rate similar to what standard radio stations pay. While conventional radio stations pay 1.7 percent of their gross revenue to ASCAP, the publishing agency will not reach a similar deal with Pandora, which creates personal radio stations controlled by users of its web and mobile apps.

The high costs of licensing music by ASCAP - which is only 1 of 3 major U.S. publishing agency, the other two being BMI and SESAC - keeps Pandora from profitability. In September, Pandora CSO Tim Westergreen released the following statement after three U.S. congressmen called for changes to radio royalty rates:

"Royalty rates for different formats of digital radio are astonishingly unequal. Currently, internet radio shoulders the largest royalty burden, far higher than any other form of radio. Last year, Pandora paid roughly 50 percent of its total revenue in royalties, more than six times the percentage paid by SiriusXM. The Internet Radio Fairness Act of 2012 addresses this discriminatory practice of favoring one form of digital radio over another by extending the common standard to include internet radio.

The discrimination against internet radio is not only fundamentally unfair, it also undermines the growth of an exciting new form of radio that listeners have embraced, and that provides unprecedented exposure and revenue for thousands of working artists. A more equitable rate structure would drive investment and innovation, bringing greater choice for consumers, and ultimately greater revenue for performing artists. This bill is a win for consumers, artists and technology innovation."